Branstad/Reynolds Tax Giveaways Cause New $131 Million Shortfall

By Pat Rynard

March 14, 2017

Legislators were bracing themselves for today’s Revenue Estimating Conference, where the newest update on the state’s revenue forecasts were released. The news was worse than some had predicted, giving another black eye to the Branstad/Reynolds fiscal management record. Iowa now faces an additional $131 million shortfall for the current fiscal year, a new blow after the earlier nearly $118 million budget hole in January.

Republicans quickly announced that a new round of budget cuts would not be implemented.

“We not must cripple our schools, public safety and many other essential services with further cuts this year,” Senate Majority Leader Bill Dix said. “Our savings accounts exist for moments such as this.”

Coincidentally, that savings account rationale was used by Democrats earlier in the session to stave off deep budget cuts to Iowa’s mental health services, public universities, Medicaid, the judiciary and many other departments. Republicans rejected that approach, arguing it was inappropriate to use the Rainy Day Fund for such things. Two months later, their 180 reversal is complete.

Despite the second shortfall, Republicans reiterated that Iowa’s economy was strong. Democrats pointed out that that exactly proves the problem with Iowa’s current revenue situation. Even when the economy is humming along, the state’s tax revenue fails to catch up because Republicans have passed too many corporate tax cuts.

“Out of control corporate tax giveaways from Republican lawmakers, Branstad and Reynolds have wrecked the state budget and put it in the red twice this year,” said Representative Kirsten Running-Marquardt. “The bad news from our non-partisan budget experts proves this sort of extreme, special-interest-first fiscal policy is failing everyday Iowans. Republicans can’t blame someone else for the budget mess they created. Iowans deserve better.”

Throughout the 2017 session, legislators have pointed to how wildly irresponsible fiscal leadership from the Branstad/Reynolds administration has led to the current crisis. The Republican corporate tax cuts passed in 2013 now cost the state over $500 million annually. The state used to have a surplus, but Republicans continued to use large amounts of the state’s carry-forward funds to cover their extra spending in recent years that outpaced Iowa’s annual revenue then.

“It’s not raining, there’s a problem with mismanaging our budget,” said Representative Mary Mascher. “We should be looking at our tax credits and our tax cuts that we have provided for out-of-state corporations that do not even reside here.”

There’s a growing push to revisit those expenditures in future legislative sessions, and this additional shortfall should spur action on that front.

“We need to know which programs actually contribute to economic growth and increasing tax receipts, which is what tax credits are supposed to do,” said Representative Chuck Isenhart. “I think it’ll force discussion … In years of declining revenue, our tax credits need to be on the table and they never have been.”


by Pat Rynard
Posted 3/14/17

  • Pat Rynard

    Pat Rynard founded Iowa Starting Line in 2015. He is now Courier Newsroom's National Political Editor, where he oversees political reporters across the country. He still keeps a close eye on Iowa politics, his dog's name is Frank, and football season is his favorite time of year.

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